Saija Finance Private Limited (SFPL)
is a Non-Banking Finance Company – Microfinance
Institution in India which, with the support of the Partnership to Advance Clean Energy–Deployment Technical Assistance
(PACE-D TA) Program, has piloted and scaled
a solar lighting energy lending program for its clients, helping thousands of poor households get access
to clean energy to reduce the use of harmful
traditional fuels and improve their livelihoods.
With a hybrid Loan Officer/Energy
Officer business model, Saija has overcome various challenges, including attracting, training
and retaining the right people for this particular initiative, but
with iterative improvements driven by client engagement, monitoring and evaluation and Technical Assistance.
Saija is headquartered in Patna, Bihar,
and has a total of 722 employees across 57
branches in 36 districts across the three states of Bihar, Jharkhand and Uttar Pradesh. As of March 2017, Saija had a customer
base of 213,502 clients with an outstanding
loan portfolio of USD 37 million, with an energy program customer base of over 52,000 energy clients across 35 energy
branches, with disbursements of USD 1.7 million
and an energy portfolio outstanding of over 820,000.
Saija Finance Private Limited (SFPL) is a Non-Banking Finance Company – Microfinance Institution working in Northern and Eastern India. SFPL
started with a small portfolio of microloans,taken over
from its associate non-profit entity,Saija Vikas,which was registered as a Society in July 2007 and made its first loan disbursements in November 2007. In addition to SFPL, the broader Saija group of enterprises includes Saija Shayog, the company’s current NGO wing,which oversees the company’s energy lending and financial literacy training, as well as Saija Consultants.SFPL (or “Saija”) provides microfinance
services to poor families and Small and Medium Enterprises in urban and rural areas. Headquartered in Patna, Bihar, Saija has a total of 722 employees across
61 branches in 36 districts of Bihar, Jharkhand and
Uttar Pradesh. As of March 2017,Saija had a customer base of 213,502 clients with an outstanding loan portfolio of USD 37 million.
Recognizing the importance
of providing much- needed clean energy access to its clients, as well as the
importance of expanding revenue channels and diversifying its portfolio
beyond traditional enterprise microcredit, Saija began a
small-scale pilot in energy financing. However, this initial
foray into energy lending never moved beyond the
initial pilot. The opportunity to partner with the PACE-D TA
Program sparked Saija’s interest in trying one more time, especially
since the Program offered a structured process for experimenting with
energy lending. Saija’s governance and management
team, especially the founders Mr. S.R. Sinha and Mrs.Rashmi
Sinha,had always been committed to the company’s goal of addressing the need
for improved energy access while diversifying the portfolio.
Early experiments had made it clear that for an
energy lending program to be successful, the complexities of technology,
after-sales service, demand creation,distribution, inventory management and
investments had to
be addressed simultaneously.
Saija joined as a partner of the PACE-D TA Program after responding to an open solicitation
for partnership in January 2015. The Program
offered technical assistance (TA) to Saija
in the critical areas of design, development
and scale up of its energy lending
program.
Saija has now developed a distinct energy lending busianess that coexists within its micro-
finance operations. The energy lending program
is implemented by Saija
Consultants, but with
SFPL’s loan officers handling the loan appraisal and disbursement of products. As
of March 2017, Sajia has reached a customer base of over 52,000 energy clients (all
women), growing by 100 percent annually, employing 315 loan officers and energy
officers in its energy program, across 35 energy branches, with disbursements of
USD 1.7 million and an energy portfolio outstanding of over USD 820,000. During this time, Saija has secured a unique earmarked investment of USD 6.5 million
from an international fund to fuel its energy
portfolio. Saija’s energy lending program
offers an illustrative case of how
the core services of an MFI can be
leveraged to achieve expanded energy access.
Saija’s experience offers
a wide range of insights on how MFIs can design and build an
energy lending program integrated within
their MFI operations that can deliver positive
impact in a profitable, sustainable manner.
Context: Energy needs of prospective clients
Saija operates across Bihar,
Uttar Pradesh and Jharkhand - three of the
poorest states in India. The combination of poor energy access and widespread poverty has meant that energy solutions must not
only reliably address the need for energy,
they must also be affordable for the end-user.
In Bihar, the state where Saija opted to begin its energy operations, 9.4 percent of Saija’s rural
energy clients are below the state poverty
line – compared to 6.3 percent of the rural population
in Bihar as a whole. Among urban clients,
the gap is reversed: 5.4 percent of Saija’s
urban energy clients live below the poverty
line compared to
14.3 percent of Bihar’s urban population.
Figure 2 shows the areas of Saija’s operations
in Bihar and electrification rates by district.
Only 40 percent of Bihar is recorded
as electrified; 60 percent of Saija’s overall
client base is electrified, but the average
hours of connectivity are low. In an independent
phone survey conducted in 2016, 69 percent
of clients reported over 16 hours per
day of connectivity, but among these, many
reported frequent and erratic interruptions
of connection, a common feature in rural
India. The consequences of this as it relates to demand are clear. While nominal
connectivity in terms of potential hours per day is fairly high among
Saija’s clients, the quality and reliability
of that access was extremely low, and
the availability of dependable access in
the hours when it is needed most was very
poor. In the early stages of the PACE-D-Saija
partnership, Saija’s management was assured
that there was great scope for Only 40 percent of Bihar is recorded as electrified; 60 percent of Saija’s overall client
base is electrified, but the average hours
of connectivity are low. In an independent
phone survey conducted in 2016, 69 percent
of clients reported over 16 hours per
day of connectivity, but among these, many
reported frequent and erratic interruptions
of connection, a common feature in rural
India. The consequences of this as it relates to demand are clear. While nominal
connectivity in terms of potential hours per day is fairly high among
Saija’s clients, the quality and reliability
of that access was extremely low, and
the availability of dependable access in
the hours when it is needed most was very
poor. In the early stages of the PACE-D-Saija
partnership, Saija’s management was assured
that there was great scope for
“We have had to build a business model that provides a quality
distributed technology to our clients, with
the financing to make it affordable, alongside
a service offering that gives the customer
peace of mind in making this
decision.” – S.R. SINHA
THE TECHNOLOGY
Saija sells a range of portable solar lanterns, mini solar home systems and a DC solar fan from two market
leaders, Greenlight Planet (GLP) and
d.light.The PACE-D TA Program is product
and partner-neutral, so an important element
is to present a range of energy products
to partners to enable them to choose the best option for their operating context.
A variety of companies offer small-scale solar products today, and there were a range of partners as well
as Saija sells a range of portable solar lanterns, mini solar home systems and a DC solar fan from two market
leaders, Greenlight Planet (GLP) and
d.light. The PACE-D TA Program is product
and partner-neutral, so an important element
is to present a range of energy products
to partners to enable them to choose the best option for their operating context.
A variety of companies offer small-scale solar products today, and there were a range of partners as well
as
Box 1
THE TECHNOLOGY
SOLAR PORTABLE LIGHTING In Bihar,
Saija introduced the Greenlight Planet (GLP)
Pro All Night in early 2015, a mid-sized solar portable light (SPL) with mobile
charging, which sells for INR 1,899 (USD
28). In UP and Jharkhand, Saija offers the similar d.light S300 light for INR 2,195 (USD 33).
Both products offer a good balance of
luminosity, flexibility and portability (they can easily be detached for carrying outside at night or hung
as a central lamp to light a room), battery
life and functionality including cell phone charging.
SOLAR HOME SYSTEM
In Bihar, Saija introduced the GLP
solar mini home system (Home 60) in late 2015, with two LED lights and mobile
charging capacity for INR 5,000 (USD 74).
In UP, Jharkhand and Bihar, DC solar fans are also offered. The solar home systems offer the added
functionality of three LED lights which can
permanently light different rooms of a house as well as the outside areas, with separate switches
for each – as well as charging capacity for
mobile phones.
Affordability Mechanism:
Microfinance
Loans for Renewable
Energy Finance
FIGURE 3. LOAN PRODUCTS
SAIJA TAILORS ITS ENERGY LOAN OFFERING SPECIFIC TO EACH PRODUCT
|
|
Saija’s Microfinance and Energy Loan Products
|
MICROFINANCE
LOAN TERM
|
1OR 2
YEARS
|
AVERAGE
MICROFINANCE
LOAN SIZE
|
20,000
TO 25,000
INR (USD 298 TO USD 373)
|
MICROFINANCE
REPAYMENT FREQUENCY
|
EVERY 2
WEEKS
|
ENERGY LOAN TERM
|
6 OR 9
MONTHS
|
ENERGY LOAN SIZE
|
1,899 TO 5,499
INR (USD 28 TO USD 82)
|
ENERGY REPAYMENT FREQUENCY
|
EVERY 2 WEEKS
|
ENERGY
INSTALLMENTS TOTAL
|
13 18
(LANTERNS) (SHS OR FAN)
|
|
|
Loan design
Saija’s team felt that integration
of energy loans with microfinance loans was
important. For small and relatively affordable
products such as those offered by Saija,
it is possible to offer “top up” loans, rolling an energy loan into a client’s existing
microfinance loan without the expense and
complications of writing a new, standalone
loan, and without creating unacceptable risk.
Moreover, it was clear from pre-pilot
research that ensuring energy loan repayments
could be made at the same time as microfinance
repayments would be important, both for the
clients (minimizing their opportunity cost
with travel time and expense) and for Saija
itself – putting too many burdens on loan officers.A balance would need to be found between
reaching clients who would truly benefit
from clean energy products, but refraining
from offering energy loans to clients with
no track record of repayment.
Eligibility of clients
On the microfinance side, Saija offers
its microfinance clients loans of between
INR 20,000 to 25,000 (USD 298 to USD 373),
or INR 15,000 (USD 224) for new
clients, who are then eligible for
larger loans on their second and subsequent
cycles. In terms of energy finance,Saija
offers top-up loans on over and above of
the existing larger, microfinance loan.These were initially given only to second-time (or subsequent)
borrowers, who had established a track record
of timely repayment over their first loan
cycle. After pilot testing, the energy loans
were extended to first-time borrowers as
well, once they had made four
microfinance repayments, and as long as the number of remaining microfinance installments was
greater than the number of energy installments
to be paid.
Repayments
For the larger products such as the GLP Home 60
system, there are additional financing options, including a nine-month energy loan instead of the
typical six-month loan. For microfinance clients in the middle of a cycle, the system can
still be bundled as a part of a top-up loan.
In all scenarios, the installments are aligned so that
the repayment for the energy component of
the client’s aggregate loan happens at the
same time as the microfinance repayment.
Guarantee and after sales services
Guarantees and after sales services
are an important part of Saija’s offering
to clients.The MFI offers its clients the
same level of guarantee extended by the manufacturer, in this case a two-year
product replacement guarantee for faulty
products from the date of purchase. The client
brings the product to the relevant branch,
and after a screening process to ensure the
product has not been tampered with (a screening
process formalized in guidelines by the product
manufacturers), the branch manager hands a brand-new product to the client. Five percent surplus
inventory is always provided by the supplier
and kept on hand to ensure immediate replacements
are available, but to date, Saija has not
faced any significant problem with faulty
products, and has recorded approximately a two percent replacement rate.
“Our clients are poor, and live
and work in the worst areas of India in terms
of access to clean and reliable energy. So
we’ve seen an opportunity to help
them, while diversifying our
portfolio and
build a new business.”
During the business planning process,
Saija realized that appropriate products
and financing were not enough to build a
robust energy lending program. It also required an operational framework
that could manage the procurement,
delivery, inventory, after-sales and marketing
of such products. Saija also needed an organizational
structure that could manage the business
while remaining integrated within the MFI
operations.
Business ethos
One of the most important success
factors for Saija was the commitment that
its founders, Mr. S.R. Sinha and Mrs. Rashmi
Sinha, maintained on the potential of distributed
renewable energy solutions to address the
energy needs of Saija’s clients. They were willing, despite prior challenges, to experiment
with a new approach and adapt processes and
systems to enable the pilot to succeed.
Operational structure
Initially Saija adopted a pure
“Energy Officer” (EO) structure in which
an EO works in parallel with the company’s
microfinance operations. The EO is an employee
of Saija, typically hired from within, and charged with accompanying “Loan Officers” (LOs)
to microfinance group meetings, conducting
product demonstrations and, serving as the
point of sale for the product.
There are advantages in an EO model
– not least that it minimizes the burden
on the LOs. However, Saija, with the support
of the PACE-D TA Program, decided to refine
this into a hybrid model. There were several reasons for this:
- There was originally one EO per branch, and the EO would accompany the LO to the field. But
the movements of the EO were tied to
those of the LO, and with no autonomy
or transport, the EO’s ability to
extend outreach was limited.
- The EO was slightly isolated within the branch from
the microfinance operations, with LOs sometimes skeptical of the value of what seemed
like a separate business channel,
and not really benefitting from it themselves.
- LOs had built up relationships of trust with
clients, and the trust was not extending
to the EOs who needed to close a sale.
The lack of integration of the EO into
the microfinance model meant that clients saw a salesperson for a solar company,
and not an employee of an MFI they knew
and trusted, coming to offer them an
opportunity.
- Under the PACE-D TA Program, this preferred model was refined into a hybrid model in which
an EO handles several administrative
requirements, conducts demonstrations
of products and takes money (for cash
sales). But the LO – sometimes called
the Field Executive or Field Officer – would conduct the appraisal and disbursement of
the energy loan. After iterative improvements,
Saija’s team with support from the PACE-D
TA Program developed a model in which
the EO accompanies the LO to microfinance group
meetings and the promotion of product benefits is a shared
responsibility. From the perspective
of the client, the product’s benefit
is implicitly “vouchsafed” by the LO.
Initially, Saija was reluctant to incentivize LOs (offering a bonus for each sale), but
this was adjusted after a pilot review
in late-2015 due to the extra work being
asked of the LOs.
- Human resources :- After the introduction of this incentive structure for
LOs, the energy program, which had earlier
made tentative progress, started showing
improved performance. The incentive
structure was so designed that it is
attractive enough to encourage LOs to
spend time promoting the benefits of clean energy to clients, but not
so attractive as to encourage undesirable or even fraudulent
- behavior (such as making future microfinance loans conditional on taking energy loans).
This balance mandates a sufficient base salary
that LOs are not financially compelled to
“push” products – something Saija is very
serious about preventing
– to vulnerable clients. And at
the same time the sales bonus structure needs
to be sufficient that taking the extra time
and effort to make sales is worth it.
In addition, Saija has used
marketing strategies like lotteries for
clients and target-based
prizes for field staff (such as an
all-inclusive overseas holiday) which can
be very effective, particularly if implemented
with the cooperation of the product partner,
which shares the incentives of the MFI and its staff in increasing sales.
This balance was however not achieved
immediately. Turnover had been high within
the energy team, especially the Energy Head
position. There had also been some skepticism about the viability of
the program after the failure of the earlier,
pre-PACE-D pilot energy program. Also, the
selection of the right Energy Lending Head
took longer than expected, resulting at first
in lack of coherence in the strategy of the
program, and uncertainty
for other staff. This instability is not unusual in MFIs with fledgling
energy programs as outside recruits
may have other aspirations in mind
(such as moving to a big commercial bank)
and do not demonstrate the personal commitment
required to grow a pilot to scale. At the same time, while internal hires may have loyalty
to the organization, they may lack particular
skills such as understanding risks, sales
and also technology.The specific set of
skills needed for managing an energy lending
program make it especially difficult to recruit the right person, and MFIs need to take into
account that the process may take longer
than they expect and that the program may
suffer setbacks during the recruitment process.
Luckily for Saija, in September of
2015 after months of flux, the MFI was able
to find a young, ambitious and dynamic new Energy Head from within the company. With support from the PACE-D TA Program, he introduced a series of program changes, including:
• Expansion beyond Bihar to UP
• Introduction of additional product companies
• Increase in frequency of field visits for management, LOs and his own team
• Implementation of training programs for field staff
• Improved interaction and communication with the area manager and field managers
• Redesign of an incentive structure beyond just LOs, all the way from regional and area managers down to EOs
The new Energy Head immediately demonstrated
aptitude in dealing with product companies, negotiating on margins, supplier discounts,
and even employee incentive schemes
through the energy companies (such as the
energy company offering a free international
trip as the prize for an internal Saija sales
competition).
Customer insights
Like many MFIs, Saija makes a point
of soliciting regular feedback from clients
during microfinance group meetings on
their perspectives about the financial
services it provides. In the case of energy products the focus is on understanding customer
insights on product usage and aspirations.
Saija and the PACE-D TA Program evaluated
results continually throughout
the pilot stage,
taking the findings and adapting the
business model to reflect customers’ wishes.
Ongoing qualitative research, including professionally-guided
focus group discussions, has built upon this.
In addition, independently-managed and analyzed
customer phone surveys has added more nuance
to the initial customer insight, including
responses on customer satisfaction, product
failures, recommendations, future intentions,
reductions in household energy expenditures,
and reasons for purchase. One of the most important sources of customer insight
is the informal feedback offered to LOs during
client meetings which they collate and
can provide to branch managers and the Energy
Head. All of these different sources of information
help to paint a more complete picture of the customer experience.
Saija uses these insights to continually
improve its product and service offerings.
A focus on women
Saija is a women-led organization
with women as its core target group - it
was co-founded and is led by Mrs. Rashmi
Sinha and its mission and daily work is focused
on empowering women at every stage. Women
make up 100 percent of Saija’s client base and most of these clients live in Bihar where women’s
lives are more restricted than in other parts
of India. Typically, women are expected to
work inside the home to generate income through
activities like embroidery or tailoring,
as well as other trades. As a result, they are the primary users of energy inside the
household and their work is usually done
after dark, due to the many demands on their
time during the day. Mrs. Sinha believes
that women are more negatively affected by traditional forms of energy and that as a result
clean energy loans particularly benefit women.
She says, “Women benefit doubly by energy
loans – they use loans for both production
and consumption. Clean energy enables women
to generate an income but it also helps
their children study, it provides a feeling of safety and security and it alleviates
health issues caused by dirty fuel.” Although
women in communities where Saija operates
do not usually work outside the home, Saija
has made a strong effort to recruit women
to work as LOs and EOs, and currently 25 percent of these roles are filled by women. By providing women
access to cleaner and safer energy in their households, by offering opportunities to generate income, and by recruiting women to take
professional roles within the organization,
Saija is ensuring that clean energy loans have an outsized positive impact on a population
that is traditionally marginalized.
Factors Influencing Continued
Expansion
Several factors have driven Saija’s
success to date and drive its plans for the future.
A long-term vision
Saija’s willingness to enter the energy
finance sector was driven by recognition of two factors: providing finance for energy products offers a profitable
way of diversifying its revenue streams and
loan portfolio (and attracting new sources of wholesale funding from investors and donors as well); and improving
the lives and livelihoods of Saija’s clients
by increasing access to quality energy products,
reducing the health consequences of kerosene
in particular, and increasing the available
productive hours (and therefore potential income) for clients’ enterprises.This
vision has been embedded in the organization since the beginning, and it is key
to the long-term perspective required for
success. Because of this vision, Saija’s
governance and management teams have been
willing to be patient, and to address challenges,
rather than give up and go back to their core service of microcredit.
Expansion
Saija recognizes that providing clean
energy access to its client
base is possible with the retention of key staff, the full buy-in by
management and adequate investment. Saija also recognizes the fact that by adopting new energy
lending strategies and business models, which
are focused on expanding sales and
distribution, it will help to avoid the
risk of plateauing when it saturates its
existing client base. Saija is currently exploring a Village Level Entrepreneur (VLE) model,
which will offer opportunities for
outreach to non- clients through agents –
perhaps using trade finance, which offers
attractive credit terms to people who
want to become solar entrepreneurs. Bihar,
in particular, has considerable demand for off-grid clean energy, especially lighting, and Saija is well-placed with its ground
operations in that state to reach millions
of new customers.
Training
Saija recognizes that a proactive
and talented workforce is critical to determining
success or failure of any initiative. Retaining talented individuals such as the current Energy Program Head is important,
but more important is the creation of
processes and procedures that support
the energy program’s continuity such as succession
plans, training manuals, and strong
communication channels between senior management, area and regional managers, LOs, EOs
and clients.
Training of LOs within the Saija
energy program has involved branch-level
training – inviting senior management for
training on sales, marketing, awareness building, process, systems adaptation and
after sales service – and frontline training
of sales staff on demand, usage, product
ranges, capacities and specifications,
clients’ “pain points,” segmentation and
positioning. Long term success of the program will require incorporation of these standardized
training procedures into the corporate culture.
Saija has a strong internal training
program for microfinance LOs, who are selected
for their enthusiasm and willingness to work.
According to Saija’s HR and Training departments,
LOs demonstrate “honesty, comfort engaging
with people of different backgrounds and
education” and recruitment processes
include testing “for stress management and conflict resolution, and identifying candidates
who want to make a career, not just take
a job.”
The PACE-D TA Program worked with
Saija to create a training program that aims
to develop, attract and retain candidates
that understand the complexity
of energy lending. The training program is
layered. LOs receive the initial
training: one week of induction training
in the field and in the head office where the Field Executives are briefed on sales processes
and engages in role-play and visualization.
The Executives are shadowed for the first
two months and regular feedback is obtained
from Supervisors. After two months a refresher
training program is organized, with a “motivational
activity” that can include games and simulations.
There are regular one-on-one meetings in
the field between Field Executives and Supervisors to evaluate job satisfaction, and some are groomed
for management positions.
Together, this demonstrates that robust
systems (which include retention and training
of staff, strong procedures and processes
that are iteratively updated) are the risk
mitigation strategy against natural attrition.
Key role of Energy Head
The turnaround of the energy program
when the current Energy Head took over showcases
the crucial importance of the role. It is
a difficult position, which requires a wide
range of skills and qualities. It is imperative
that the Head believes in the program, and displays a commitment that will be noticed
and emulated by the person’s subordinates.
While it is tempting to use recruiters to
find an external hire who has experience
in managing large teams, Saija instead recruited
from within, giving a chance to someone who
had strong communication skills and a real commitment to the program.
Lessons Learned
1. Choose the right business model
Initially, Saija introduced a pure EO model where the EO served as the Point of Sale. Clients made it clear that their preference would be to deal with LOs with whom they have a long relationship. However, Saija decided
that a pure LO model would be unviable for reasons of focus,
time management and misaligned incentives.
Saija created a “hybrid” of sorts, which balanced the need for EOs to conduct product demonstrations with the important role of LOs in appraising loans and managing client interactions.
2. Develop appropriate
incentives for staff
It is difficult to scale an energy
finance program without the proper incentives for field staff and senior area managers. Existing staff are used to evaluate enterprise loans, and will be reluctant to divert attention from that to selling energy products without an incentive. The incentive needs to be crafted carefully
so that it does not result in “forced selling” where products are pushed on people who cannot afford them, or who are too vulnerable to be able to refuse. Most importantly, incentives need to be matched with a fair base living wage.
3. Hire the right energy
team leader
Having the right personnel in a management role can fundamentally change the program dynamics. Finding someone, regardless of age or experience, who understands
what the company is trying to achieve, and knows how to convey that idea with enthusiasm is critical.
4. Pilot the program
carefully
It is tempting for the management, in its efforts to show results, to rush the pilot stage and move as quickly as possible to the roll out and expansion phase, however, it is much easier to adapt processes and procedures during the pilot stage. Saija has learned that a carefully designed
pilot phase that precedes scale-up is critical
as it enables the MFI to learn from mistakes and better understand its new and unfamiliar business and also ensure that the model is right before committing to investment in expansion.
5. Invest in training
It is easy to cut corners on training with the rationale that time spent training is time that could be spent selling or earning.While this is true, it is also a false economy. Training staff, both initially so they feel confident at
their job, and then on an ongoing basis so
that problems can be identified, tactics
honed, feedback provided and talent identified is key. Training is always an investment that pays off.